The numbers and costs are big, but I don't want to talk about the actual numbers now, but rather about why they matter. Academics will tell you of the "unbearable lightness" of the regulatory burden, that benefits exceed costs, that you don't need to worry about it, nothing to see here.
But in free competitive enterprise, it takes a lot of bad ideas to generate a winner. Unnecessary and meddlesome overregulation and intervention create uncertainty that slows breakthroughs and growth.
To the extent ill-founded, overlapping and unclear regulations (and tax policy) dominate, businesses cannot plan, hiring becomes an insupportable risk and citizens suffer. Nor will businesses hire if they know they cannot fire thanks to aggressive labor law, goodwill notwithstanding.
Referring to the economy and well-being, Obama recently asserted in his 2015 State of the Union Address that “tonight, we turn the page.”
But growth emerging from a woefully low baseline is hardly turning over a new leaf.
An astounding 92 million Americans aren't working, putting labor force participation at a 36 year low, with nearly 12 million having dropped out during the Obama administration.
Unemployment is “down” because statistics omit those who’ve given up the job hunt. Some job growth we've seen has been attributed to an end to unemployment benefits.
Data point to the highest ever part-time and temporary-job creation rates in contrast to full time career positions. A popular blog laments the “slow death of American entrepreneurship.” Per capita debt is high, too.
Headlines tell painful tales, like
One recruiter described in the Wall Street Journal how regulations undermine employment, while other analysts point to an inverse correlation between regulation and innovation. And industry anecdotes parallel such statistics; In food service, regulations are driving restaurants out of business and even sending them abroad.
One can recognize that small business may not be the hyped “backbone” of the entire economy as Popular Economics author John Tamny has noted. Rather, new businesses appear to be as John Dearie and Courtney Geduldig point out in Where the Jobs Are. Yet, regulations are a hidden tax for both small and large firms; obscured in prices for most of us, if you’re a businessperson, you’ve found regulations. It’s an awakening mirroring the college graduate encountering his first docked paycheck. Assuming he's found a job, that is.
Policymakers and regulators fail to recognize that, while businesses want to “create jobs” as an article of good citizenship, that goodwill doesn't change the reality that jobs are a cost, a liability.
If businesses are “punished” for hiring or cannot predict regulations coming their way, it is little wonder that they don’t expand.
One British businessman addressing French employment regulations in the Financial Times observed:
… [W]hen I am 100 percent utterly and completely certain that it is an absolute certainty that it is an absolute necessity that I need to recruit a new employee, I go to bed, sleep well and hope that the feeling has gone away by the morning.
The threat of regulation can make companies behave in reactive rather than entrepreneurial ways, distorting markets and creating inefficiency, compounding stagnation. Perhaps most ominous is that over half of existing firms wouldn’t do it again given today’s anti-business climate of uncertainty.
Wynn Resorts CEO Steve Wynn called Washington:
...the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right.
People like Wynn and our British businessman aren't alone in such conclusions. The Atlantic conducted a Silicon Valley poll finding government to be a key innovation barrier, while Gallup polling found record numbers pointing a finger at big government .
Regulatory liberalization that reduces uncertainty and increases the returns to risk-taking is the yet-to-be-deployed stimulus package. The problem now is that Congress will have a tough time with a liberalization agenda in Obama's “year of the veto.”
But things can change. Next week's Ten Thousand Commandments will cover some solutions.
This article is in part based on "One Nation, Ungovernable? Confronting the Modern Regulatory State" in Donald J. Boudreaux, ed., "What America's Decline in Economic Freedom Means for Entrepreneurship and Prosperity," Fraser Institute and Mercatus Center of George Mason University, April 2015.
